Summary: 1. Australia: Budget • Delivered on 14 May • Key changes i. Thin cap: “safe harbor” rules tightened ii. Nexus test for interest deductions iii. Taxation of gains made by non-residents on sales of shares in Australian land-rich companies - “Land” to be widened to include mining information and certain intangible assets - 10% non-final withholding tax 2. Exchange of information • Australia, UK, and U.S. tax authorities are working together to find assets hidden in Cayman Islands, BVI, Cook Islands, and Singapore • Singapore government will significantly strengthen its framework to allow information exchange • Australia / Switzerland initial new double tax treaty (which will allow ATO to identify Australians with Swiss bank accounts) 3. China: Circular 165 and Bulletin 19 i. Circular 165 - Relates to the “beneficial owner” condition in the dividends article in the China / Hong Kong double tax arrangement - Provides guidance on Circular 601 “negative factors” and the Bulletin 30 “listed company safe harbor” - Circular 165 will likely be applied by SAT to the dividends articles in other double tax treaties (and possibly also the interest and royalties articles) ii. Bulletin 19 - Relates to the issue of whether in-bound seconded employees cause an “establishment” (domestic law) or PE (treaty) for the foreign employer - “Real or substantive employer” principle is followed - First test: Does the overseas company take responsibility for the work performed by the employee and does it assess the employee’s performance? - Second test: List of 5 factors - If the answer to the first test is “yes” and if at least one of the 5 factors in the second test is satisfied, then + Overseas company has an “establishment” in China (domestic law) + That establishment is a PE (for treaties), if maintained for a sufficiently long time period 4. Cases • India: Convergys case - Delhi Income Tax Appellate Tribunal - Indian subsidiary provides substantial support services to U.S. company - U.S. company held to have a PE in India (at the Indian subsidiary’s premises), under Art. 5(1) of the India / U.S. treaty - Tribunal applied a 4 step methodology to calculate the profits attributable to the PE 5. In brief • Hong Kong / Qatar treaty signed • New Zealand: Budget
